COMMENT Reflecting on lessons not learned


Now and Then... O


nce upon a time I listened to a speech by a


very articulate man who explained to a packed and distinguished audience


in London why he wouldn’t dream of buying a bottle of his favourite Champagne from his local duty free shop. He questioned why he would carry


around a heavy bottle that wasn’t priced much differently from his local high street. Even if it was being sold in ‘a duty free shop’. Was it realistic for this duty free shop – or


even the duty free industry as a whole – to expect him to pay virtually the same price for the same product…if not more? Especially considering he could just as


easily access the same product from his local wines and spirit store in Switzerland, while under no grand illusion whatsoever that he was somehow getting some sort of bargain.


Supporting common goals As some readers will have already guessed, the speaker I am referring to was none other than Peter Brabeck-Letmathe, the former Nestlé Vice-Chairman and CEO, speaking no less than 14 years ago in June 2003 at the very first Trinity Forum event. His address aptly entitled ‘Long-term


vision over short term imperatives’ was uncompromising and straight to the point, as he highlighted many of the problems facing the travel retail business and suggested (more than gently) that fundamental fixes in some areas were well overdue – and the industry should bravely address these head on. He warned the industry audience against


complacency, especially following so many years of excise and tax free sales to captive market consumers. Underlining his vision, Brabeck-Letmathe


also asked the audience to stretch its imagination and picture what mighty sales levels might be achieved with only modest customer penetration improvements. His scenario at that time envisioned a


doubling of the industry’s 2002 annual sales (estimated by Generation) from around $20bn to $40bn. Little could he know that the business would subsequently sprint past $60bn


58 TRBUSINESS


by the year 2016, without most of his recommendations being adopted. (All of which only poses the question of where it


would be today if they had been-Ed). The point of all this reminiscing is that


Brabeck-Letmathe’s comments are mostly as relevant today as they were over a decade ago and they are certainly worth revisiting. Any readers who were also at that first


Trinity event may also recall Brabeck- Letmathe’s other red light warning related to the Carrefour and Tesco supermarket chains – and even Wal-Mart. He asked if they might then take more


than a passing interest in the international duty free retail business... Well, while few could have envisioned


any of these or other domestic retail giants coming into the industry at that time and imposing 60% to 70% retail margins, that all seems somewhat irrelevant now. Especially considering we all seem to have


managed ‘to do it all to ourselves, alongside high rentals’, without any need for help from ‘mere outsiders’. So what is the point of all this? Well in a


few year’s time (and quite possibly more than just two), the UK, at least, will be hoping that Brexit – whether hard, soft, medium or flat – will open the door once more for a return to genuine duty free allowances, albeit in a different era where travel is perhaps not held up as such a luxury event as it once was.


Recognising the opportunities This gives the former leading duty free market in the world (yes the UK once was…) two to three years to grasp Brabeck- Letmathe’s steely challenge back in 2003 to convert ‘problems into opportunities’. The Duty Free World Council (DFWC)


has been preparing for this for quite some time now by laying the groundwork and building the relationships through its own officers, as well as through its excellent advocate partners at Hume-Brophy. With this in mind and besides those who are already contributing, it would also be nice to see some others join in – especially those that stand to benefit richly from a return of duty free allowances. Of course lobbying is expensive, but lethargy ultimately costs a whole lot more in the long term. «


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